A product sells for $750 in the United States.The exchange rate is $1 to 1.65 Swiss francs.If purchasing power parity (PPP) holds, what is the price of the product in Switzerland?
A) 123.75 Swiss francs
B) 454.55 Swiss francs
C) 750.00 Swiss francs
D) 1,237.50 Swiss francs
E) 1,650.00 Swiss francs

Question

Quizplus · Accepted Answer

Purchasing Power Parity (PPP) suggests that in the absence of transaction costs and barriers to trade, identical goods should have the same price when expressed in the same currency. If 1 USD equals 1.65 Swiss francs, then a product that sells for $750 should cost 750 * 1.65 = 1,237.50 Swiss francs in Switzerland.

A Product Sells for $750 in the United States